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The NAHB/Wells Fargo Housing Market Index fell three points to 29 in October, its lowest level since June 2012. Builders also reported weaker buyer traffic and more discounting as mortgage rates and construction costs increased.
Builder confidence in the market for newly built single-family homes fell three points to 29 in October, its lowest reading since June 2012, according to the NAHB/Wells Fargo Housing Market Index released by the National Association of Home Builders. The report links the decline to mortgage rates above 7% in recent weeks and higher energy and construction costs, signaling continued pressure on home sales and affordability.
All three components of the seasonally adjusted index declined. The measure of current sales conditions fell two points to 33, while the index for sales expectations over the next six months dropped five points to 32. The prospective-buyer traffic index also fell five points, to 18. An HMI reading above 50 means more builders view conditions as good than poor; the October overall reading was well below that threshold.
Builders reported relying on price cuts and incentives to support sales. In October, 43% cut prices, the highest share in six years, while the average reduction remained at 6% for a seventh consecutive month. 65% offered sales incentives, marking the 19th straight month in which at least 60% of builders reported using them.
The decline was broad across the four regions listed in the report: the Northeast fell one point to 38, the Midwest dropped three to 40, the South lost one to 30 and the West decreased two to 26. The source also reports that single-family home permits rose 2.9% in the Midwest; it does not provide a comparison period for that figure.
Weak Traffic Deepens Sales Pressure
The report points to a market in which builders are facing weaker buyer interest while offering discounts and other incentives to keep homes moving. The traffic index of 18 is a low reading, and NAHB chief economist Robert Dietz said buyer traffic had reached its lowest level since April 2012, excluding the pandemic’s onset in April 2020. That is a separate comparison from the overall HMI’s June 2012 low.
For prospective buyers, higher borrowing costs can reduce purchasing power and make monthly payments more difficult to manage. Price cuts and incentives may improve the terms of some new-home purchases, but the survey does not establish how widely those offers are available or how much they change buyers’ total costs. For builders and suppliers, the weak confidence reading may indicate added caution around sales expectations, though the report does not measure future construction or employment directly.
The figures also show the squeeze is not limited to demand. Builders cited higher costs for construction loans, building materials and diesel, while the report describes elevated energy costs. When financing and construction expenses rise at the same time that buyer traffic weakens, builders may have less room to absorb costs without changing prices, incentives or building plans.
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How the October Index Is Measured
The HMI is a monthly survey of homebuilders’ perceptions of the market for newly built single-family homes. It asks builders to rate current sales and expected sales over the coming six months as good, fair or poor, and to rate prospective-buyer traffic from high to very high, average, or low to very low. Component scores are used to calculate the seasonally adjusted overall index.
A score of 50 is the dividing line: above it, more builders view conditions as good than poor; below it, more view them as poor. The October reading of 29 therefore reflects more negative than positive builder assessments, not a count of homes sold or a direct measure of prices. The report says the overall index was down three points from September, but the supplied material does not identify the calendar year.
NAHB Chairman Bill Owens attributed the weaker environment to mortgage rates climbing above 7% in recent weeks, along with higher gas prices and inflation that he said had weakened buyer traffic. He also cited construction-loan, material and diesel costs. These are the chairman’s stated explanations from the survey release; the index itself records builders’ views rather than isolating the cause of the decline.
“Nationwide, more than one-third of builders reported immigration enforcement activity in their market areas during the past month, causing construction delays and discouraging legal workers from reporting to work.”
— Bill Owens
What the Survey Cannot Establish
The HMI measures builder perceptions, not completed sales, home prices or the number of buyers priced out of the market. The release attributes weaker conditions to mortgage rates, costs and consumer confidence, but it does not quantify how much each factor contributed to October’s decline. The year of the October reading is also absent from the supplied report excerpt.
Owens said regulatory reform efforts by the Trump administration were helping ease some cost pressures, and he described immigration enforcement activity as causing delays and discouraging legal workers. Those statements are attributed claims in the release; it gives no estimates of the savings from regulatory changes or the scale of construction delays. The reported Midwest permit increase has no stated time comparison in the source material.
Next HMI Reading Will Test Direction
The next monthly NAHB/Wells Fargo HMI release will show whether builder confidence and its three components continue to fall or begin to recover. Changes in mortgage rates, construction expenses, buyer traffic, price cuts and incentives will help clarify whether the October reading reflects a continuing deterioration or a temporary setback.
The source does not provide a date for the next release or forecasts for future readings. Until another survey is available, October’s figures establish a low point for builder confidence relative to the period cited by NAHB, but they do not confirm how new-home sales, permits or construction activity will change.
Key Questions
What was the builder confidence reading in October?
The NAHB/Wells Fargo HMI fell three points to 29. The report says that was the lowest reading since June 2012.
What does an HMI reading below 50 mean?
The index is below its neutral dividing line. A reading under 50 means more surveyed builders view market conditions as poor than good; it is not a measure of home sales volume.
How many builders reported cutting prices or offering incentives?
43% of builders said they cut prices in October, with the average cut at 6%. 65% reported using sales incentives.
Which parts of the HMI fell?
All three did: current sales conditions fell to 33, sales expectations for the next six months dropped to 32, and prospective-buyer traffic declined to 18.
What happens next?
The next monthly HMI report will indicate whether builder perceptions and buyer traffic continue to weaken. The source material does not give the next release date.
Source: rss
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